MODELING INVESTMENT‐SECTOR EFFICIENCY SHOCKS: WHEN DOES DISAGGREGATION MATTER?

The most straightforward way to analyze investment‐sector productivity developments is to construct a two‐sector model with a sector‐specific productivity shock. An often used modeling shortcut accounts for such developments using a one‐sector model with shocks to the efficiency of investment in a capital accumulation equation. This shortcut is theoretically justified when some stringent conditions are satisfied. Using a two‐sector model, we consider the implications of relaxing several of the conditions that are at odds with the U.S. Input–Output Tables, including equal factor shares across sectors. The effects of productivity shocks to an investment‐producing sector of our two‐sector model differ from those of efficiency shocks to investment in a one‐sector model. Notably, expansionary productivity shocks boost consumption in every period, whereas expansionary efficiency shocks cause consumption to fall substantially for many periods.     

MASS LAYOFFS,MANUFACTURING AND STATE BUSINESS CLIMATES: DOES STATE POLICY MATTER?

This study provides the first estimates on the relationship between state public policies and job losses in the manufacturing sector. In addition, spatial model estimation is adopted to identify any effect that state policies may have on the adopting state as well as upon neighboring states. We find evidence that favorable ratings regarding some elements of a state's business climate coincide with a lower incidence of job loss. This relationship holds beyond the adopting state and is correlated with lower job losses in contiguous states. (JEL J50, J60, M50)     

DOES THE RIGHT TO CHOOSE MATTER FOR DEFINED CONTRIBUTION PLANS?

We find that sensitivity of fund flows and fund performance are both related to participants' right to choose their investments in defined contribution plans. Under the Mandatory Provident Fund system of Hong Kong, both employers and employees are required to contribute to a retirement account. Originally, employees' investment choices were restricted to a subset of funds chosen by their employers. The system was later modified so that employees are allowed to invest in any fund within the system. We present evidence that flows of fund have become more sensitive to past fund performance after this policy change, and that average fund performance in the system has also improved. Based on the improvement in fund performance, we estimate the accumulated cost of the lack of choice to be around 10% of the current total asset value of the system. (JEL G14, G18)     

FARMERS’ WILLINGNESS TO COOPERATE IN ECOSYSTEM SERVICE PROVISION: DOES TRUST MATTER?

Ecosystem service provision in agriculture may require cooperation between farmers. Trust fosters cooperation in many economic and social interactions and is important to the success of traditional agricultural cooperatives. Little is known about how trust affects farmers’ willingness to cooperate to provide an ecosystem service, what types of trust are most important, and under what conditions trust may matter. In this study, we present results of a survey of Missouri crop farmers exploring the role trust plays in farmers’ stated willingness to cooperate to control pests. We find that most farmers say they are willing to cooperate, and most farmers are willing to trust others. However, we find little evidence that trust positively influences farmers’ willingness to cooperate to control pests. Instead, we find that trust may only matter under certain conditions, such as when participants’ farms are dissimilar, and that other determinants, such as the perceived benefit of cooperation and environmental concern, are more important than trust to farmers who are contemplating cooperation to control pests.     

ON THE IMPACT OF PUBLIC DEBT ON ECONOMIC GROWTH: DOES COUNTRY RISK MATTER?

This study examines the nonlinear impacts of four country risk indices on the debt‐growth nexus for 61 countries in a panel data framework. Our results show evidence of the different debt‐growth nexus under the different degrees of country risk. Under a high‐risk environment, a country's economic growth is harmed by raising its public debt. The negative effects public debt has on economic growth become weak under low political and financial‐risk environments, while an increase in public debt could help to stimulate economic growth under low composite and economic risk environments. In addition, the differences of countries' income and debt levels also lead country risks to have different effects on the debt‐growth nexus, suggesting that a country should borrow appropriately based on its current risk environments while improving economic performance. (JEL C33, E02, H63, O43)     

DOES EXPERIENCE MATTER? SALARY DISPERSION,COACHING, AND TEAM PERFORMANCE

Using Major League Soccer as a unique dataset, this study examines the direct and indirect role of coaches' experience in determining team performance. Inspired by labor market studies, we applied traditional indicators of team salary structure and, unlike previous studies, empirically test the hypothesis that coach experience affects the way in which team salary distribution influences performance. Our results suggest that coaches with experience as professional soccer players improve team performance directly but worsen the negative effect of a skewed salary distribution. Moreover, experience as a player is more important than coaching experience. (JEL D3, J3, M5)     

SOCIAL COMPARISON AND SUBJECTIVE WELL‐BEING: DOES THE HEALTH OF OTHERS MATTER?

The importance of social comparison in shaping individual utility has been widely documented by subjective well‐being literature. So far, income and unemployment have been the main dimensions considered in social comparison. This paper aims to investigate whether subjective well‐being is influenced by inter‐personal comparison with respect to health. Thus, we study the effects of the health of others and relative health hypotheses on two measures of subjective well‐being: happiness and subjective health. Using data from the Italian Health Conditions survey, we show that a high incidence of chronic conditions and disability among reference groups negatively affects both happiness and subjective health. Such effects are stronger among people in the same condition. These results, robust to different econometric specifications and estimation techniques, suggest the presence of some sympathy in individual preferences with respect to health and reveal that other people's health status serves as a benchmark to assess one's own health condition.     

POLLUTION PERMIT SYSTEMS AND FIRM DYNAMICS: HOW DOES THE ALLOCATION SCHEME MATTER?*

I use a firm dynamics model to compare two permit allocation schemes commonly used in pollution permit systems. In the first, closing plants keep their permits, and new entrants do not get them, whereas in the second, closing plants lose their permits, and new entrants get free allowances. Calibrating the model with data from power plants participating in the U.S. program, I find that, compared to the first scheme, in the second arrangement, (i) plants stay, on average, 3.6 years longer and (ii) although the aggregate emission rate is lower, the plant distribution displays more dirty and low‐productivity plants.     

ISLAMISTIC TERROR AND THE LABOUR MARKET PROSPECTS OF ARAB MEN IN ENGLAND: DOES A COUNTRY'S DIRECT INVOLVEMENT MATTER?

This paper considers two questions on the labour market discrimination against Arab or Muslim men after the recent terrorist attacks. First, I consider for the first time the impact of the September 11 attacks on the wages and working hours of Arabs in Europe. Second, I test whether the fact that a country was the direct target of terrorist attacks influences discrimination using the Madrid train bombings on 11 March 2004 and the London bombings on 7 July 2005 as quasi‐experimental events. The results indicate that the wages, hours worked and employment probabilities of Arab men were unchanged by the attacks.     

DOES SIZE MATTER? THE IMPACT OF CHANGES IN HOUSEHOLD STRUCTURE ON INCOME DISTRIBUTION IN GERMANY

Income inequality in Germany has been continually increasing during the past 20 years. One cause of this development, among others, could be structural shifts in household formation due to long‐term societal trends. These affect per capita incomes, which has repercussions for the income distribution even if wages remain constant. The aim of this paper is to quantify the proportion of changing household structures in the increase in inequality. We find that the growth of the income gap in Germany (for both East and West from 1991 to 2007) is indeed strongly related to changes in household structure and employment behavior, and a large part of this increase is compensated by the welfare state.     

HOW DOES FOREIGN BANK OWNERSHIP IN THE BANKING SECTOR AFFECT DOMESTIC BANK BEHAVIOUR? A DYNAMIC PANEL DATA ANALYSIS

The purpose of this paper is to investigate how foreign bank ownership in the banking sector affects domestic bank behaviour and whether this relationship depends on the economic and financial conditions of the host country. This paper contains 795 individual banks in 39 countries covering the period 1999–2006. Foreign ownership is calculated using bank level data as a proxy for the degree of foreign bank ownership in the banking sector. First, we find that foreign bank ownership is associated with a decrease in both the profitability and overhead expenses of the domestic bank after applying the system panel Generalized Method of Moments model. Second, a lower level of economic development of the host country enhances the positive effects of foreign bank ownership on the income, profit and cost of domestic banks. Third, financial development plays an important role in determining the effect of foreign bank ownership. Fourth, while the use of aggregate foreign ownership data may provide us with a big picture, it may not explain why individual banks in the same country perform differently, which this study will answer.     

DOES ADVERTISING MATTER? ESTIMATING THE IMPACT OF CIGARETTE ADVERTISING ON SMOKING AMONG YOUTH IN DEVELOPING COUNTRIES

The goal of this paper is to evaluate the impact of cigarette advertising on smoking among youth in developing countries. Using micro‐level data from 19 developing countries, we examine the structural relationship between smoking behavior and advertising exposure and the reduced‐form relationship between smoking and advertising bans. Instrumental variables are used to address the endogeneity of advertising exposure. Country‐specific unobserved heterogeneity is further reduced by controlling for measures of antismoking sentiment and cigarette prices. After accounting for the endogeneity of advertising, we find that the positive correlation between smoking and advertising exposure in our sample can be largely explained by the disproportionately higher propensity of smokers to observe advertising rather than a direct causal effect of advertising on smoking. (JEL I12, I18)     

DOES NEAR‐RATIONALITY MATTER IN FIRST‐ORDER APPROXIMATE SOLUTIONS? A PERTURBATION APPROACH

This paper studies first‐order approximate solutions to near‐rational dynamic equilibrium models. Under near‐rationality, agents' subjective beliefs are distorted away from rational expectations via a change of measure process which fulfills some regularity conditions. In most applications, the beliefs distortion process is also directly observed by (a subset of) the decision‐makers – e.g., ambiguity‐averse households or policy‐makers with a concern for robustness – and therefore included into their optimization problems. We investigate conditions for existence and local uniqueness of solutions under endogenous distortions, as well as the relation with their rational expectations counterparts. We show that linearly perturbed solutions may well be affected by the presence of distorted beliefs, depending on the underlying model economy. In particular, while directly affecting first‐order decision rules, near‐rationality may also induce failure of the certainty equivalence principle. Moreover, the martingale representation of distorted beliefs might prove non‐unique, pointing to a subtle form of equilibrium indeterminacy.     

OUTPUT FLUCTUATIONS PERSISTENCE: DO CYCLICAL SHOCKS MATTER?

The aim of this paper is to identify the different sources of persistence of output fluctuations. We propose an unobserved components model that allows us to decompose GDP series into a trend component and a cyclical component. We let the drift of the trend component switch between different regimes according to a first‐order Markov process. To calculate an appropriate p‐value for a test of linearity we propose a bootstrap procedure, which allows for general forms of heteroscedasticity. The performance of the bootstrap is checked by means of a Monte Carlo simulation. Our study concerns the USA. We find that cyclical shocks appear to play an important role on the observed persistence of output.     

DOES SIZE MATTER? THE INFLUENCE OF FIRM SIZE ON WORKING CONDITIONS,JOB SATISFACTION AND QUIT INTENTIONS

Using a detailed survey on Spanish workers, this paper investigates the relationship between firm size and working conditions, the extent to which firm size differences in workers' job satisfaction can be accounted for by differences in their work environment and the impact of firm size on workers' quit intentions. The results indicate that: (1) employees in larger firms face a worse work environment; (2) working in large firms significantly reduces job satisfaction when no controls for working conditions are included, but taking them into account makes differentials across size categories statistically insignificant; and (3) no systematic differences exist in intentions to quit across firm size categories, irrespective of conditioning on wages.     

APPARENT BIAS: WHAT DOES ATTITUDE POLARIZATION SHOW?

Many, though not all, experiments have found that exposing groups of subjects who disagree to the same evidence may cause their initial attitudes to strengthen and move further apart, or polarize. Some have concluded that findings of attitude polarization show that people process information in a biased manner so as to support their initial views. We argue that, on the contrary, polarization is often what we should expect to find in an unbiased Bayesian population, in the context of experiments that find polarization.     

CORRUPTION AND MICROCREDIT INTEREST RATES: DOES REGULATION HELP?

Misunderstandings about the structure of microcredit interest rates continue to generate rich criticism of the industry's high interest rates. Research has focused attention on the cost structure of interest rates and, more recently, on macroeconomic and macro‐institutional factors. While the cost structure is probably the most important determinant of interest rates, other factors also matter. In addition to other important results that usually validate the empirical literature, this paper finds that microcredit interest rates respond positively to corruption. The analysis shows that there is asymmetry between the effects of corruption, depending on whether or not the MFIs are regulated. While corruption has a positive and significant impact on interest rates of unregulated MFIs, it has a negligible impact on interest rates of regulated MFIs.     

DOES TECHNOLOGICAL PROGRESS MAGNIFY REGIONAL DISPARITIES?

We study how technological progress in manufacturing and migration costs interact to shape the space economy. Rising labor productivity in the manufacturing sector fosters the agglomeration of activities, whereas falling transport costs associated with technological and organizational innovations foster their dispersion. Since these two forces have been at work for a long time, the final outcome must depend on how drops in the costs of producing and trading goods interact with the various costs borne by migrants. Various extensions show the robustness of these conclusions.     

DOES THE EFFECTIVENESS OF BOARD OF DIRECTORS AFFECT FIRM PERFORMANCE OF CONSUMER CO‐OPERATIVES? THE CASE OF ICOOP KOREA

Consumer co‐operatives in Korea have been growing rapidly since they launched their own shops. If co‐operatives would be too much oriented to enlargement or economic growth, they might easily pay no attention to members’ participation which is one of the priorities in co‐operatives. It could lead to losing the value of co‐operatives. So it is important to adjust the balance between members’ participation and economic growth. This paper focuses on the role of board of directors in doing that. It aims to examine how effectiveness of the board influences members’ participation and the participation has effect on performance of co‐operatives in the case of iCOOP Korea. The variables such as communication with members and usage of management skills and knowledge are employed as measures of the effectiveness of the board in decision‐making process. The data are collected by survey the respondents of which are 222 directors of 30 primary co‐operatives. It is analyzed by Structural Equation Model. The findings of the research are as follows. Firstly, communication of the board with members increases the members’ democratic participation, and the increased participation contributes to improving the financial performance. Secondly, management skills and knowledge of the board does not have significant relations with the level of members’ participation, even though members’ economic participation has significantly positive relation with the financial performance. The findings imply that members’ voluntary participation will be increased when boards of co‐operatives try to reflect members’ needs in the decision making processes, and it can help the co‐operatives improve their financial performance. It suggests a clue for the trade‐off between the value of co‐operatives and growth of business which many co‐operatives are trying to resolve.     

WHEN DOES DETERMINACY IMPLY EXPECTATIONAL STABILITY?

Since the introduction of rational expectations, there have been issues with multiple equilibria and equilibrium selection. We study the connections between determinacy of rational expectations equilibrium and learnability of that equilibrium in a general class of purely forward‐looking models. Our framework is sufficiently flexible to encompass lags in agents' information and either finite horizon or infinite horizon approaches to learning. We are able to isolate conditions under which determinacy does and does not imply learnability and also conditions under which long‐horizon forecasts make a clear difference for learnability. Finally, we apply our result to a relatively general New Keynesian model.